Virus Effects on Apartments and Real Estate by Joseph W. DeCarlo, MBA, CPM, CCIM, CRE have moved back with their parents during this lockdown period. Will they now want to move into their own apartment again? Will they want roommates? Will they want a smaller less expensive unit? Since many employees have worked remotely from their homes during this lockdown, will they want to continue to do so and not have a daily commute to work? Maybe they will go in one day a week. Having good Wi-Fi is a necessity for apartments in the future.
We are now in unchartered and difficult waters with the COVID-19 virus epidemic. The rules, customs and ways of doing business are changing and still unknown. Social Distancing will alter how people buy, sell and lease apartments after the COVID-19 crisis has ended. We must be flexible, adaptable and changeable in the future. DEMOGRAPHICS The buzz word of liberals in California and other states, prior to COVID-19, was “higher density”. Build more high-rise apartments in urban centers (cities) and near rapid transit lines. The highest death rates and infections have come from New York City and other highdensity areas. In the future, will apartment tenants, condo owners, choose to live in closely packed urban areas 24-7 with crowded buses and subways? Suburban areas have fared better as well as semi-rural areas just outside the suburbs with more room to spread out and observe the safe distancing (6 feet). Even when they find a cure for COVID-19, viruses will reoccur in the future and the fear will linger and people may not want to live in cities.
The real demand is for the homeless and people who cannot afford to pay market rent. Our Governor never mentions the State providing rent subsidies, like HUD Section 8, to the potential tenants who cannot afford rent. Rent control caps what landlords can charge, thereby effectively reducing the dollar amount State and Local housing programs pay in affordable housing subsidies.
The demand for apartments in Southern California will continue to grow.
SUPPLY OF APARTMENTS The development pipeline has lots of new apartment projects, however most of these are Class A, high end and high rent apartments. Due to high land costs and using union labor, it is not feasible to build working class “C” apartments in Orange County and Los Angeles. The potential of even more stringent rent control measures on the November ballot is also a deterrent to construction of new apartment buildings which are only exempt for 15 years.
DEMAND FOR APARTMENTS The demand for apartments in Southern California will continue to grow. The jobless rate has soared and those that remain employed fear losing their jobs or having their job eliminated. The single-family housing market will decline in price as employment will determine qualifying for a mortgage loan. Many younger people
I see additional housing supply coming from
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